Crawling peg

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As a crawling peg (even crawl , sliding parities called) is called an exchange rate system , in which the exchange rates did not significantly change at once but several times in smaller increments. A rate of change in the exchange rate that has been determined and announced in advance may not be exceeded within one year in relation to a foreign currency or a foreign currency basket or linked to selected macroeconomic indicators .

Definitions

In the literature, the definitions of the crawling peg by different authors differ widely in different areas:

  • Heine / Herr : “With a crawling peg, the central bank of a country announces the percentage of the weekly, monthly etc. devaluation of the exchange rate. [...] only the central bank that follows a crawling peg (must) ensure that the targeted exchange rate development is maintained. "

In general, not only a devaluation of one's own currency is in the foreground, theoretically an appreciation can also take place, even if this case rarely occurs.

These two authors only refer to the specified percentage and not to the possibility of also taking into account the development of economic variables (e.g. inflation ) in the sliding parity adjustment .

  • Dieckheuer : “A country changes the parity of its currency or shifts the band in which the exchange rate of its own currency is allowed to be with a certain regularity. The exchange rate (or the mean rate in the case of the fixed range) is either changed with fixed, previously announced rates or adjusted to the development of fixed economic indicators (e.g. the development of price relations). "

Dieckheuer emphasizes in his definition that the exchange rate is not only based on the announced rates, but that there is also the possibility of being linked to the development of a specific indicator. This is exactly what the authors Heine and Herr ignored.

This definition also makes it clear that the variant of the crawling tape is a type of crawling peg and is subordinate to it. Many other authors are of the same opinion (e.g. Hungary , Brazil and Poland, among others, are included in the crawling peg system in almost all sources, but they actually use a crawling tape system), while others take it make a distinction.

  • International Monetary Fund : The currency adjustment takes place at regular intervals vis-à-vis a single currency and a basket in small amounts at a fixed rate or in response to changes in the selective quantitative indicators (past inflation differences with the main trading partners, differences between the forecast and planned Inflation rate with important trading partners, differences between the official and corresponding market prices etc.).

Compared to the definition by Dieckheuer, among others, the IWF strictly separates the crawling tape from the crawling peg and does not, like many other authors, subordinate it to the crawling peg. The crawling peg represents a point target here and not a range in which the parity adjustment can be located.

Term classification

The crawling peg is an exchange rate system (also exchange rate regime) that cannot be assigned to either the variable or the fixed exchange rate system, but is assigned to the interim solution (also interim regime) in the literature. In the further classification of these interim solutions, the views of the authors take different paths.

The present approach is based on the official classification of the International Monetary Fund. The official exchange rate regime classification from 1975 to 1998, in which there were three main categories, was replaced in January 1999 by a new classification scheme that is based on de facto politics and is structured in more detail.

The so-called "De Facto Classification of Exchange Rate Regime" consists of a total of thirteen different exchange rate regimes, which are assigned to three main groups ["Hard Pegs Regimes" (3), "Floating Regimes" (2) and "Intermediate Regimes" (8)].

Interim exchange rate regime
Soft pegs
Conventional fixed pegs Crawling peg Crawling tape
1. Vis-à-vis a single currency 2. Vis-à-vis a basket 3. Horizontal bands 4. Forward looking 5. Backward looking 6. Forward looking 7. Backward looking 8. Tightly managed floats

Source: IMF

There are basically two variants of the crawling peg:

  • Active (forward-looking) crawl: defined devaluation rate <expected inflation difference (difference between target inflation rate and foreign inflation rate). This results in the real appreciation of the domestic currency
  • passive (retrospective) crawl: fixed depreciation rate = expected inflation differential; the real exchange rate remains constant

Historical summary

It is often the opinion in literature that Sir Henry Roy Forbes Harrod first described the crawling peg system in his work "International Economics" in 1939. In fact, his friend John Maynard Keynes had already taken up the idea of ​​the crawling peg in his recommendation for the Genoa Conference in 1922 .

According to a study by the IMF, there have been fewer and fewer countries in recent years that have chosen the crawling peg as their exchange rate system. The share of the crawling peg in the entire interim exchange rate regime was 13.6% in 1990 and 15% in 1993, compared to only 5.6% in 2001. The trend continues, in 2007 only six countries chose the crawling peg. But V. a. the crawling tape system, which is usually assigned to the crawling peg, is hardly used by the countries.

year Countries with a crawling peg system Countries with a crawling tape system
1999 Angola , Bolivia , Costa Rica , Nicaragua , Tunisia , Turkey 6th Chile , Honduras , Israel , Colombia , Poland , Sri Lanka , Hungary , Uruguay , Venezuela 9
2000 Costa Rica, Nicaragua, Turkey 3 Israel, Honduras, Poland, Sri Lanka, Hungary, Uruguay, Venezuela 7th
2001 Bolivia, Costa Rica, Nicaragua, Zimbabwe 4th Israel, Honduras, Hungary, Uruguay, Venezuela 5
2002 Bolivia, Costa Rica, Nicaragua, Solomon Islands 4th Belarus , Honduras, Israel, Romania , Uruguay, Venezuela 6th
2003 Bolivia, Costa Rica, Nicaragua, Solomon Islands, Tunisia 5 Belarus, Honduras, Israel, Romania, Slovenia 5
2004 Bolivia, Costa Rica, Nicaragua, Solomon Islands, Tunisia 5 Belarus, Honduras, Israel, Romania, Slovenia 5
2005 Bolivia, Costa Rica, Honduras, Nicaragua, Solomon Islands 5 Belarus 1
2006 Bolivia, Botswana , Costa Rica, Iran , Nicaragua 5 0
2007 Azerbaijan , Botswana, China , Iraq , Nicaragua, Sierra Leone 6th Costa Rica 1

Source: IMF Annual Report 1999–2007

Countries with a crawling peg

General

Countries that have opted for a crawling peg system try to combine the short-term advantages of an exchange rate fixation and those of exchange rate flexibility. High-inflation countries in particular prefer this exchange rate system to a fixation, as there is the possibility of optimal inflation, e.g. B. through seigniorage income (the state brings more money into circulation, can thus use more goods and services and thus generates a profit in the creation of money) in order to ensure the country's international competitiveness . Furthermore, a partial exchange rate fixing z. For example, other countries have a lot of trust and credibility in a key currency due to the rapid decline in high inflation rates.

Hungary

In March 1995 the adjustable peg system was replaced by the crawling peg system in Hungary and the monthly depreciation rate was reduced from 1.9% to 1%. The aim of this central bank policy was to combat inflation, because the monthly depreciation rates were set below the rate of price increase (active crawl). After further monetary, fiscal and income policy measures, the forint was able to stabilize as early as the summer of 1995 and capital imports increased rapidly.

Hungary is one of the sure candidates who will join the euro zone in the future . According to the contract, an EMU candidate must be in an exchange rate band of +/- 15 percent for at least two years. However, a change in the exchange rate regime was necessary for possible accession, because the crawling peg is not considered as “active monetary policy preparation” for participation in the euro and is rated as completely unsuitable. The Hungarian forint in the form of a crawling peg was therefore abolished on October 1, 2001 in order to meet the specified convergence criteria like all other member states and to introduce an exchange rate band linked to the euro.

Further examples

Botswana uses a crawling peg to tie the pula to the US dollar .

In October 1991, Poland changed its currency regime from fixing the zloty to a crawl-peg link to a basket of currencies (45% US dollars, 35% DM , 10% pounds , 5% francs and 5% francs ) in order to fight inflation . The zloty was devalued monthly by a fixed percentage of 1.8 percent (at the beginning) to 0.3 percent (at the end). The zloty has been flexible since April 12, 2000.

Individual evidence

  1. ↑ Michael Heine / Hansjörg Herr: Economics. Oldenbourg, Munich / Vienna 2003, p. 613.
  2. ↑ Gustav Dieck Heuer: International Economic Relations. Oldenbourg, Munich / Vienna 2001, p. 253.
  3. ↑ Andrea Bubula / Inci Oetker Robe: The Evolution of Exchange Rate Regime Since 1990: Evidence from De Facto policies. IMF - Working Paper, September 2002, p. 15.
  4. ↑ Andrea Bubula, Inci Oetker Robe: The Evolution of Exchange Rate Regime Since 1990: Evidence from De Facto policies. IMF - Working Paper, September 2002, pp. 6-8 ( imf.org PDF).
  5. ^ Roy Forbes Harrod: The Life of John Maynard Keynes. MacMillan, London 1951.
  6. ↑ Harold L. Wattel: The Policy Consequences of John Maynard Keynes. ME Sharp, 1985, p. 151 ff.
  7. ^ Toren, Susanne: The use of the exchange rate as a nominal anchor in the CEFTA states between 1989/90 and 1997 . Dissertation University of Göttingen, 1999, p. 170
  8. ^ Toren, Susanne: The use of the exchange rate as a nominal anchor in the CEFTA states between 1989/90 and 1997 . Dissertation University of Göttingen, 1999, p. 182 ff.
  9. ↑ Axel Jochem / Friedrich L. Sell: Currency policy options for the Central and Eastern European candidate countries for accession to the EU . Mohr Siebeck, Tübingen 2001, p. 56 ff. And p. 179 ff.
  10. ↑ Federal Ministry of Finance, BMF Monthly Report May 2002, p. 78 ff.

literature

  • Borchert, Manfred: Foreign trade . Gabler, Wiesbaden 2001, ISBN 3-409-63907-1
  • Bubula, Andrea / Ötker-Robe, Inci: The Evolution of Exchange Rate Regimes Since 1990: Evidence from De Facto Policies . IMF Working Paper, September 2002
  • Dieckheuer, Gustav: International economic relations . Oldenbourg, Munich / Vienna 2001, ISBN 3-486-25806-0
  • Gandolfo, Giancarlo: International Finance and Open-Economy Macroeconomics . Springer, Rome 2001, ISBN 3-540-41730-3
  • Harrod, Roy Forbes, Sir: The Life of John Maynard Keynes . MacMillan, London 1951, ISBN 1-125-39598-2
  • Heine, Michael / Herr, Hansjörg: Economics . Oldenbourg, Munich / Vienna 2003, ISBN 3-486-27293-4
  • Jarchow, Hans-Joachim / Rühmann, Peter: Monetary Foreign Trade II - International Economic Policy . Vandenhoeck & Ruprecht, Göttingen 2002, ISBN 3-8252-1335-8
  • Jochem, Axel / Sell, Friedrich L .: Monetary policy options for the Central and Eastern European candidate countries for accession to the EU . Mohr Siebeck, Tübingen 2001, ISBN 3-16-147529-1
  • Krugman, Paul R./Obstfeld, Maurice: International Economy - Theory and Politics of Foreign Trade . Pearson Studium, Munich 2006, ISBN 3-8273-7199-6
  • Siebert, Horst: World Economy . UTB, Stuttgart 1997, ISBN 3-8252-8148-5
  • Toren, Susanne: The use of the exchange rate as a nominal anchor in the CEFTA states between 1989/90 and 1997 . Dissertation University of Göttingen, 1999
  • Wattel, Harold L .: The Policy Consequences of John Maynard Keynes . ME Sharp, 1985, ISBN 0-87332-316-5

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